Personal Reflections
What are the economic and business realities and who decides
what gets recorded? Since each business experiences these differently, I can
understand their records being quite independent. It makes sense that a firms
accounts should help us to connect and engage with their individual economic
and business realities, using bookkeeping to structure a relevant and faithful interpretation.
A structure which shows the various parts and functions all working together,
systematically throughout the whole firm. So what kinds of bookkeeping is
common to all entities? And just how can a firms accounts be a hindrance to
interested parties?
I read lots of things. It keeps me informed, entertained and
my mind focused. I read things in all sorts of forms, fiction, facts, hard copy
(I like the feel and smell of paper still), soft copy and imaginary copy? Yes,
imaginary. Can you really believe everything you read online? Or in the
newspaper? It can be difficult to sort through the fact from fiction, which is
why I think it’s important to cross reference and engage with others for a
better clarification, verification and understanding. It is fantastic to be able
to communication using various forms of contact quickly and easily too. I have
reconnected with peers, met new ones and invited new connections all with the
common goal of learning. I am finding my way and it is paved with relationships
the likes I have never experienced before and I like it!
I have a vague recollection of Luca Pacoli from ACCT11059,
the 500 year old Italian monk referred to as ‘the father of accounting’. I’m
sure the more I read the more I’ll remember. There are those foundations
instilled such as the proprietorship concept and the accounting equation that
still hold fast but I realise there is much accounting knowledge that needs
reigniting to have a solid grasp. In my working days as a tax consultant, the
matching principle was firmly implanted as a form of evidence of accountability
and the importance of the dual entry accounting. So I am building on the past
and infusing fresh perceptions.
I invariably notice how the world is geared toward right-handed
inclinations. The simple task of washing dishes was taught to me by my mother
to wash the dirty dishes on the left and place clean dishes of the right. As a
consequence I have a tendency to address tasks working from left to right. One
of the other accounting foundations I recall is debits on the left and credits
on the right. I have always wondered why and I have a feeling I will understand
during this course.
The digital age is absolutely fascinating. I am a little ‘old
school’ which is commonly referred to nowadays as ‘the long way’ but I am still
convinced doing the long yards ends up being shorter. You can’t skip steps and
not leave something behind. If you don’t build a solid foundation the structure
will crumble. I do understand how much faster and easier the digital age makes
information available but you still need to know the how and the why for it to
be useful. That’s what I hope to get out of doing this course. How is this information
useful and why? What transactions best reflect the economic and business
realities of a firm? How are these interpreted as data? How does double entry
accounting ensure the relationship between the different elements of the business
model that underpins accounting stay intact???? I want to deepen my
understanding and transform the way I see business. Not just as a profit maximizing
machine but as a wholistic entity encompassing all stakeholders.
The digital disruption for me means learning new software. I
am in constant awe of things we can do via the World Wide Web, it’s important
to keep up with it and it’s moving very fast. Where is it all going indeed!!!
The revolutionary AI is rapidly advancing and I actually welcome its arrival. I’ve
been dreaming of personal robots since the 80’s when we asked what we expected
by the year 2000! I doubt reading will ever not be needed, so whether paper or
screen we will still need to understand how to interpret the data, even though
our robot buddy might be able to Google for us in the very near future.
I recall using journals every day to enter sales receipts,
invoices and payments and other things. How much easier it is today with
computer technology. Some of the books clients would bring were very heavy and
other simply shoeboxes full of bits of paper. I kind of enjoyed organizing these
unassuming messes into logical columns of data, but even more handing the bulky
bits of paper back and hand over a tiny flash drive with all the information
stored. I’m not sure what that data meant to them or what they used it for but
it had to be better than bulky books and bits of paper! Most of the time it was
the bottom line, they were most interested or the profit and loss statement but
sometimes sales and costs. I still wonder what they could do with those numbers
and how they helped them.
I always knew the owner was considered separate from the business
for legal purposes and also for dual accounting purposes, two sides to a coin.
The simple idea that transactions affect not only the firm but the owner as
well. It is kind of crazy that computers can’t handle the notion of left and
right but instead interpret as positive and negative. I never thought of the
purchase of an asset as the obligation a firm owes the owners but that it what
it does! Why would you pay for something that you wouldn’t expect to add value?
By the same token the firms liabilities also need to prove their investment value.
Trust is huge in the business world and I’m starting to understand the role
confidence plays as a vital part of business success.
The accounting equation assets = equity + liabilities and
its extension assets + expenses = equity + liabilities + revenue is cemented in
my knowledge. All the power elements working together to give us a balanced
view the business. I am thinking more than ever what each of these qualities represent
from various points of views. I am thinking these components reflect the
objectives and values of the business but what does that mean to the community?
How do we read the data?
“The Conceptual Framework for Financial Reporting, as set by
the International Accounting Standards Board (IASB) which is the independent
standard-setting body of the International Financial Reporting Standards (IFRS)”
it is good know there are rules and regulations guiding and governing the
information a firm records and must report. This provides a confidence and
assurance of accuracy, that what is being recorded is a faithful representation
of the truth.
It makes sense that an asset owes you an obligation and a
liability takes away value and equity as the part ‘left over’. You spend money
to make money and spend more to maintain making more money! Accounting is the
technique of showing the value of a firm in precise dollars. Money is the language
and accounting is its interpreter. This is how we can keep track of business as
it evolves. I think income is a better term for revenue. It creates an
understanding of the obligation. If I invest money, I expect money to be
incoming. I understand how revenue relates more to the transfer of value
between equity investors and the firm as well as expenses. There’s no such
thing as a free lunch!
I’d completely forgotten the concept of accrual accounting.
Of course it seems ludicrous to complete the value of a firm only upon its
demise. The simple concept of accounting for actions that arises as they occur
rather than when cash is exchanged, especially with all the different forms of
payments available. So we make some judgements and assumptions to account for
the expectation of cash exchange, which is also assessed subjectively. I guess there’s
a certain level of risk taking that may or may not pay off when going into
business.
Well there are lots of lessons to be learned in business and
accounting gives a solid foundation from which economic consequences can work
out positively by assessing good judgements and better assumptions. Rather than
focusing just on the bottom line, all lines can be tracked and matched against
to avoid costly mistakes.
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